Panamanian Law Firm Mossack Fonseca is having a very bad week. The mass leaking of a huge numbers of papers have shown what many of the oligarchs of the world are doing to preserve their ill gotten gains. Radio New Zealand has described the situation:
A huge leak of confidential documents has revealed how the rich and powerful use tax havens to hide their wealth.
Eleven million documents were leaked from one of the world’s most secretive companies, Panamanian law firm Mossack Fonseca, which sets up companies in offshore tax havens.
The BBC reports the papers show how Mossack Fonseca has helped clients launder money, dodge sanctions and evade tax. The company says it has operated beyond reproach for 40 years and has never been charged with criminal wrong-doing.
The data contains secret offshore companies linked to the families and associates of Egypt’s former president Hosni Mubarak, Libya’s former leader Muammar Gaddafi and Syria’s president Bashar al-Assad.
It also reveals a suspected billion-dollar money laundering ring that was run by a Russian bank and involved close associates of President Putin.
The Financial Review has reported that New Zealand has played a part in what has occurred:
When New Zealand Prime Minister John Key flew into Malta for the Commonwealth Heads of Government Meeting in November 2015, he already knew he shared some important views with his host, Malta’s Prime Minister Joseph Muscat, about the importance of keeping the tax secrets of foreign investors.
Both countries are quiet achievers in the ranks of global tax havens, and both are determined to keep it that way.
While Malta has been fiercely resisting pressure to close tax avoidance loopholes used by foreign companies, including Australian firms, to move profits out of the European Union, New Zealand has fought just as hard to protect its laws that make foreign profits tax-free and invisible for beneficiaries of its offshore trusts.
But what Key didn’t know, as he and Australia’s Prime Minister Malcolm Turnbull mingled with Muscat at CHOGM, was how deep those links really ran.
Just weeks earlier, Muscat’s chief-of-staff, Keith Schembri, and Malta’s energy minister, Konrad Mizzi, had used New Zealand’s secrecy laws to set up two offshore trusts. These were to be linked to a secret Dubai bank account and to two Panama companies that Schembri and Mizzi had set up in 2013 through a Panamanian law firm.
The revelation of the New Zealand trusts has triggered ongoing crisis for Muscat’s government, but it also increases pressure on New Zealand to tighten its tax loophole for foreign trusts.
Makes you wonder why New Zealand is so disinterested in closing the loopholes that let this occur. Fran O’Sullivan recently commented on this:
But it is notable that one of the reasons why New Zealand has yet to follow Australia and bring in rigorous laws to clamp down on multinationals which are not paying significant tax here is because this country is competing for investment.
The Key Government is proceeding at a very slow pace indeed, which is rattling New Zealand businessmen like Spark CEO Simon Moutter, who is adamant that it is unfair to local companies that they have to compete against offshore players who have a tax advantage.
So it looks like New Zealand is being used to hide the investments of the 1% at least some of which is from dubious sources. And they do not even pay tax.
The National Party. Of the 1%, by the 1%, for the 1% …